Director atFirst4Lawyers Qamar Anwar, Managing with... An interview Scotland Regional focus: investing Our guideto profession legal the for publication specialist Watson’s Armstrong firms partners inlaw income heldby Tax onproperty reference dates with accounting Tax planning reliefs allowances and Topical taxissues, In thisedition...

A track record ofproviding solutions to thelegal profession Autumn 2019 In this edition... Welcome

Welcome to the Autumn 2019 edition of The LAW, the specialist publication for the legal profession from the legal sector team at Armstrong Watson. 2-3 Topical tax issues, allowances and reliefs Specialists are available from all of our 17 offices, to provide pro-active support and advice to lawyers in compliance and business improvement matters. This publication is designed to allow us to share our collective experience in acting for lawyers throughout the UK. 4-5 Regional focus: Following our acquisition, we are now helping many more law firms in Scotland Scotland and have just launched our Breakfast Briefing events in Glasgow and . The first events are on maximising income from existing clients with Simon McCrum and pricing strategies with Nigel Haddon. If you’ve not had an invite, please let me know.

6-7 Tax planning with accounting reference For England and Wales firms, we are also looking forward to the new SRA Accounts dates Rules, which are due to come into effect on 25 November 2019. We have started our series of formal public training courses on the new rules and the feedback from delegates in , Leeds, Hull, Carlisle, Liverpool and Manchester has been excellent. We are also being engaged by firms for in-house courses for their fee earners and finance teams. 8-9 Tax on property income held by Please contact me if you would like to be included. partners in law firms There is a distinctly tax feel to this edition of The LAW, based on receiving so many requests from lawyers for tax advice – either for themselves or their clients. In this edition we cover: • Topical tax planning tips 10-11 Our guide to investing • Tax benefits of changing your year end • Tax on property held by partners in law firms • A guide to investing 12-13 An interview with... Qamar Anwar, Managing Director • Regional focus - Scotland at First4Lawyers To find out more on any of the above, including how we can work with you to help you and your clients, please do get in touch with me.

The Law Society has exclusively endorsed Armstrong Watson for the provision of the following services to law firms:

-- Strategy Planning Workshops -- Pro-active Tax Planning -- Business Plans -- Tax Compliance -- Benchmarking -- Audits -- Mergers & Acquisitions of Law Firms -- Accounts Rules Reporting -- Law Firm Valuations -- Accounts Preparation Andy Poole -- Forecasts -- LLP conversions Legal Sector Partner -- Raising Finance -- Incorporations @AW_AndyPoole -- Lock-up Reviews -- ABS Applications [email protected]

The Law Autumn 2019 I Contents The Law Autumn 2019 I Page 1 Topical tax issues, allowances and reliefs

£ The world of tax is ever changing with new legislation £ Investor’s Relief Any expenditure incurred up to this date will still be Residence Nil Rate Band being brought in and changes being made. Here we eligible and so the message is use it before you lose it. discuss some topical tax areas we have seen so far Although relatively new to the tax scene, Investors £ As well as being able to set off the Inheritance Tax this year. Relief (‘IR’) is an important Capital Gains Tax (‘CGT’) Loss of Lettings Relief (‘IHT’) Nil Rate Band of £325,000 against the value of relief which many individuals may not have considered. an individual’s estate, the Residence Nil Rate Band was As well as various changes to income tax, the last also introduced on 6 April 2017. IR provides a reduced CGT rate of 10% for individuals Finance Act also brought changes to the CGT reliefs IR35 for the Private Sector who make qualifying disposals of shares in a trading The Residence Nil Rate Band is an additional £100,000 available when selling a residential property. company. There is a lifetime limit of £10 million of allowance that is available to individuals from 2017/18 to After the introduction of the IR35 or “off-payroll qualifying gains per individual. be used against a residential property held within their working rules” to the public sector in 2017, HMRC When selling a property, Private Residence Relief (‘PRR’) is an extremely attractive relief for taxpayers. PRR can estate. This allowance is set to increase by £25,000 are now rolling these out to the Private sector from IR may be easier to claim for certain individuals as reduce a chargeable gain on sale to nil depending upon each year until 2020/21 when it will reach a maximum April 2020. This will have an impact on legal practices unlike Entrepreneur’s Relief (‘ER’), the conditions for IR the periods of occupation and periods of ‘deemed of £175,000. engaging any contractors through Private Service do not require an individual to be an employee of the occupation’ as long as the property was a person’s Companies (“PSC”). company, at least at the time the shares are acquired. As with the IHT Nil Rate Band, the Residence Nil Rate main residence at some point. There is also no requirement to have at least 5% of the Band is also transferrable between spouses on death. The aim of the legislation is to ensure that individuals voting rights as there is for ER. As a result, by April 2020/21, spouses with estates who work like employees, pay broadly the same As well as PRR, letting relief is also available on the sale of a property which at one time had been occupied as a valued at £1 million could be exempt from paying any amount of employment taxes and National Insurance IR however is only available on new ordinary shares main residence and has since been let out. The amount IHT - saving tax at 40%. contributions. Conversely as this is a deemed issued on or after 17 March 2016 and these shares must of letting relief available is the lower of: employment status, it is the contractor who will suffer be held continuously for at least three years, meaning Where a deceased’s estate exceeds £2 million the the tax burden without any entitlement to statutory that this tax year will be the first year in which we will • £40,000 amount of Residence Nil Rate Band is reduced by £1 payments or employment rights. see relief claims being made. • The gain attributable to the let period for every £2 it exceeds this amount. Reliefs such as Business Property Relief are ignored when calculating Up to now businesses in the private sector have not • The amount of PRR It is possible to use a combination of both ER and IR the value of the estate, therefore an individual’s estate been required to determine the employment status which could provide individuals, with significant gains, For disposals from 6 April 2020 however, letting relief may be valued higher than they anticipated and as a of individuals working through their own service up to £2 million of tax savings throughout their lifetime. will only be available to those who share occupation result the relief is tapered. company, the burden and risk was passed to the PSC. IR is potentially a useful relief for new company start- of the property with the tenant throughout the letting ups, especially for individuals who don’t wish to be Many of these changes have either come into effect or Under the new rules the responsibility for ensuring that period, making the relief much more restrictive. involved in the day to day management of the business are due to within the next few months and so taxpayers the taxable status of the contractor is correct, and any and where ER may not be available as the conditions should be aware of these and should also seek tax resulting tax exposure, will now fall upon the engager. Shorter Time Limits to Pay Capital are not met. advice quickly to utilise any reliefs and allowances This determination will need to be made and provided £ Gains Tax before they are lost. to the contractor prior to work being undertaken and £ certainly within 31 days of the contract being entered Capital Allowances changes Not only are CGT reliefs being reduced, HMRC are also into or the services commencing. looking to reduce the deadline for payment of CGT for There have been significant changes to capital residential properties. The tool to help with the determination is the HMRC allowances which have had an impact this year. From 6 April 2020 any disposal of a UK residential “Check Employment Status for Tax” tool (“CEST”) and Annual Investment Allowance (‘AIA’) for anyone who has used this tool you will know that property will have to be reported and the tax paid on From 1 January 2019 to 31 December 2020 the 100% it does not always give a helpful outcome. However, any gain arising within 30 days. A ‘residential property AIA for qualifying expenditure on plant and machinery we understand that this is being worked on with a return’ will need to be completed and a payment made has been temporarily increased from £200,000 to £1 view to making it more robust/enhanced and helpful to within the 30 days, however where PRR reduces the million. businesses pre 2020. gain to nil no return will be required. The key to being able to maximise the AIA is down Is there any good news? The rules will only apply This 30 day window runs from the date of completion, to strategic planning on the timing of investment in to medium or large sized companies within the not the date of exchange for a normal disposal for CGT qualifying assets. private sector and so small companies (less than 50 purposes. Enhanced Capital Allowances (‘ECAs’) employees, turnover of £10.2m or less or balance Currently, CGT is not payable until 31 January following sheet of less than £5.1m) escape the rules – for now. Companies that make qualifying purchases on energy the end of the tax year in which a disposal is made. Becky Bowness - Tax Director efficient or water saving plant and equipment can Therefore this new deadline will cause a major reduction [email protected] currently claim 100% Enhanced Capital Allowances on in timescales and compliance could prove a challenge. top of 100% AIA. However, this relief is being abolished from April 2020.

The Law Autumn 2019 I Page 2 The Law Autumn 2019 I Page 3 Alternative Business Structures This debate is currently ongoing, hence is very much Regional Focus: Scotland a hot topic. Another issue on the agenda is that of Alternative The itself has lobbied to Business Structures (‘ABS’) which would allow external protect the term ‘lawyer’ and limit the use of this to ownership of legal firms in Scotland. This is being qualified and regulated people, and have looked at considered at both regulatory and government levels an overhaul of how complaints against solicitors are under proposals that would allow external ownership handled and provided. With Armstrong Watson now having been present in the central belt of Scotland for almost two years, Jim of up to 49% of a Scottish legal firm, an arrangement Lockhart, Tax and Accounting partner based in our Glasgow office gives his thoughts on the Scottish legal that is not possible under current rules. A review is also taking place to determine whether sector market and the issues and opportunities that it is currently facing. the current mutual professional indemnity insurance ABS is currently available to firms in England and scheme should be replaced with each firm requiring Wales, and with the current trend of large English separate insurance. firms entering the Scottish market, it seems that ABS The sector may be being introduced to the by the back door. Total premiums may reduce across the profession One would expect that this should accelerate any as they appear to have done in England and Wales The Scottish legal profession is made up of almost 1,200 private changes to the rules to ensure that Scottish firms are after the end of the mutual scheme there. However, law firms, employing 24,000 people and an annual economic competing on a level playing field. this would presumably mean that closing firms would contribution of more than £1.5 billion. This is made up of a large require PII run off cover at considerable cost, making number of smaller firms and an ageing partner demographic The Scottish Government have also indicated that it more difficult to close a firm, as it is in England and which suggests that there may be succession issues in the short Scottish Law firms should be able to accept external Wales. to medium term. investment, which they are unable to do under current rules. The sector has encountered significant change over the last few Conclusion years through consolidation at all levels, new entrants to the Demographic makeup of the market and some high profile firms falling by the wayside. profession in Scotland The Scottish legal sector is very dynamic and At the largest end, there have been some high profile mergers and is experiencing significant change in respect of acquisitions that have brought more international firms into the On another note, in December 2015 for the first time consolidation through merger and acquisition and one Scottish market, examples of such being Denton’s merger with the number of female practising solicitors in Scotland would expect that trend to continue for the foreseeable Maclay Murray and Spens , and ’s merger with overtook that of males. This hasn’t yet filtered its future. HBJ Gateley, both in 2017. The impact of this is that the number way through to senor positions, but it is an indication The Roberton report has also raised a number of of significant players in the worldwide market has increased and that in the coming years we can expect a change in issues that are being hotly debated, and I would expect it would suggest that the Scottish space has both the work and the gender balance of senior positions of the Scottish to see some change at a regulatory level over the next expertise to support these firms. legal sector. few years as a result of this. On a similar note, the middle market has also experienced activity in the mergers and acquisitions space with firms such All in all, the Scottish legal sector market is living in as MacRoberts, Gilson Gray and WJM making acquisitions over Regulatory interesting times… the past couple of years, and the sector signalling its intention to continue along this path. The Scottish legal market has also experienced some activity at the regulatory level, with the Roberton review This trend points towards a market that is increasing in terms of being published in October 2018, which looked at value and expertise, whilst experiencing consolidation at all levels. Legal Services regulation in Scotland and made some It would be expected that as technology and the digital economy recommendations in this respect, with the overriding continue to change how services are provided, and who these one being that there should be a single, independent firms are competing against, then the trend will continue. regulator for all providers of legal services in Scotland. The sector has also seen some high profile firms disappear from This has sparked some disagreement from the current the market over the past few years with McClure Naismith, Pagan regulatory bodies as it would ultimately see the Faculty Osborne and Morisons LLP no longer being in business. The latter of Advocates and the Law Society of Scotland losing two failed in September 2017 and March 2019 respectively, with their regulatory powers. Thorntons Solicitors, the Dundee based law firm, acquiring some or all of the trade and assets of each. In a recent article responding to the proposals, Alison Atack, president of the Law Society of Scotland, said These were, by all means, not the only casualties in recent times. that this move ‘would see the setting and enforcing of standards….carried out by an inexperienced organisation...[whereas] the Law Society of Scotland is best placed to continue to regulate the solicitor Jim Lockhart - Tax and Accounting Partner profession’. The Scottish Government response to the report recognises that the main proposal has [email protected] polarised opinion.

The Law Autumn 2019 I Page 4 The Law Autumn 2019 I Page 5 Tax planning with accounting reference dates Specialist

What’s in a date? 21 Law Firm When you are setting up or running your legal Unfortunately this doesn’t mean that no tax is paid in practice, the choice of accounting date may not the 2018/19 tax year, so why change from one to the be high on your list of considerations. But, it other? can make a substantial difference to the financial Changing from a 31 March accounting date to a Accountants cashflow position of the business, and with some careful planning, changing the accounting date can 30 April accounting date can certainly give rise to provide an opportunity to make savings in certain a significant cashflow advantage when profits are circumstances. increasing. Although this move would create new overlap profits, it also pushes the payment date for For many years now, sole traders and partners in the larger tax liability forwards and means that the unincorporated businesses and LLPs have been profits are assessed in a later tax year giving more assessed to income tax on their taxable profits arising opportunities to undertake tax planning to mitigate for the 12 months to the accounting date ending the income tax, such as making pension contributions. in the relevant tax year. This is relatively simple to The reverse to this also applies. It can be difficult to understand if the business has an accounting date of pay tax on previously high profits where there is a 31 March, not necessarily so straightforward if it is 30 sudden downturn in the business or there is a need April! for unplanned large expenditure meaning cash is Depending on the choice of accounting date, new tight, particularly if accurate tax provisioning has not businesses and individuals joining existing partnerships been undertaken. By changing a 30 April accounting Realise the benefits only true may see some of their profits taxed twice because of date to 31 March, it is possible to utilise those existing the way in which the rules operate. Profits taxed twice overlap profits to reduce the amount of tax payable. are known as “overlap profits” and in simple terms, For many businesses, the administrative simplicity of legal sector accountants can anything other than a 31 March (or 5 April) year end aligning the accounting year with the tax year is also will lead to these overlap profits arising. They can also advantageous reducing the complexity of explaining occur if an accounting date is changed to an earlier accounting profit, distributable profit, taxable profit bring to your law firm point in the tax year and for those of us old enough and tax provisions. to remember, transitional overlap profits were created when the basis of assessment was changed in the As you can see, there is no one right answer to the expert advice support 1996/97 tax year. accounting date question. Each firm should review For and you can trust visit their future plans and circumstances on a regular Relief for overlap profits can only be utilised in certain basis to see whether a change in accounting date may www.armstrongwatson.co.uk/legalsector circumstances such as when a business ceases, be advantageous. when a partner retires or when an accounting date is changed to a later point in the tax year. This may seem like a bad thing but it all depends on circumstances. Having a 31 March accounting date means that there is a reasonably short gap between making profits and paying the income tax liability on those profits whereas a 30 April accounting date extends that period significantly allowing firms to plan ahead. If we look at the 2019 financial year as an example, 31 March 2019 profits are assessable to tax in 2018/19 and tax will be payable in January and July 2019 with a balancing payment due 31 January 2020. Move that Accounting | Auditing | Tax | Strategy | Coaching | Training accounting date forward one month and the profits Debbie Johnson - Senior Tax Consultant are instead taxable in 2019/20 and all the payment [email protected] Benchmarking | Structuring | Merging | Valuing | Exiting | Starting dates have moved forward a year.

The Law Autumn 2019 I Page 6 The Law Autumn 2019 I Page 7 Finance cost deductions on Rent-a-room and Airbnb residential letting Rent-a-room is a valuable tax relief allowing you to let We are now more than half way through the HMRC furnished room/s within your home and covers total Tax on property income held by phasing stages, from allowing mortgage interest as an gross rents up to £7,500 in the year. These days, this can expense in full, to allowing the mortgage interest as a slot nicely into Airbnb or Bed & Breakfast type income. partners in law firms reduction of tax at 20%. If your total rental income is £7,500 or lower, you are The tax year 2018/19 sees only 50% of the interest being not required to complete a Tax Return but you will if it allowed as an expense against rental income (this reduces exceeds this amount. further in 2019/20 to 25%, and nil from 2020/21). HMRC state rent-a-room can not be claimed if the room The other 50% of interest is currently used as a tax is - All things rental reduction calculated at 20% (75% of the costs will be • not part of your main home when you let it treated this way in 2019/20, and the full amount from 6 • not furnished Do you have a property, other than your main home, If the property is owned jointly then both owners can April 2020). anywhere in the world, which you rent out? Does HMRC each claim £1,000 on their share of income. • used as an office or for any business - you know? Not informing HMRC of your circumstances could Those who are higher rate or additional rate tax payers can use the scheme if your lodger works be considered tax evasion, and the penalties could be Unfortunately this allowance in not permitted for will suffer additional tax due to this change. in your home in the evening or at weekends severe. It is best to advise HMRC of your position as soon commercial property or property held in a partnership/ or is a student who is provided with study as possible, as penalties can be substantially reduced for company. For example facilities unprompted disclosure. A landlord has the following rental income in 2018/19 • in your UK home and is let while you live abroad HMRC require that you advise them of any rental income The minefield of allowable costs and is a higher rate tax payer (40%). The above rules should be considered with regard to you receive over £1,000 through your Self Assessment you can use against your rental your Airbnb, and whether it will qualify for the rent-a- Rental income after deductible expenses £10,000 Tax Return, even if your total income in the year is below income room relief, as an example, an outbuilding would most likely not qualify. your tax free personal allowance. Less: mortgage interest (total £3,000 (£1,500) Some of the costs that may be allowable against your x 50%) Is the property owned by you and your spouse/civil rental income are included below. This is a rough list and Letting Relief changes from Total taxable income £8,500 partner? The general rule is that the ownership will be by all means not comprehensive: 6 April 2020 on the disposal of shared equally, unless the property was purchased in Tax due at higher rate 40% £3,400 your rental property different ownership proportions, e.g. if the house was • Letting agent/management fees purchased by one person before they got married, then • Accountancy fees Changes are due to come into effect from 6 April 2020 • Building and contents insurance the property would be in that person’s sole name unless Mortgage interest deduction (total £3,000 (£300) with regard to letting relief when you dispose of your transferred. • Mortgage interest (although this is now x 50%) £1,500 property. restricted – see below) Tax deduction (£1,500 at basic rate 20%) If the property was purchased whilst married, you are • Maintenance and repairs to the property (but This could apply for example if you own your own home deemed to share ownership equally. If you wish the not large/capital improvements – see below) Total tax due 2018/19 £3,100 as a single person and then find the love of your life, who property to be owned in a different proportion, then • Utility bills, like gas, water, and electricity you subsequently move in with and enter into marriage a declaration of trust can be written up setting out the • Rent, ground rent, service charges, council tax or a civil partnership, but you retain your original home The landlord then has exactly the same income in the ownership percentage and the date the declaration came • Services you pay for, like window cleaning or and rent it for an income. Currently, when you come to 2019/20 tax year to compare. into force. This document cannot be backdated. You may gardening sell the property you may be able to claim letting relief, want to consider this option if the property is rented out • Other direct costs of letting the property, like and if the property is owned jointly this is worth up to Rental income after deductible expenses £10,000 and your spouse/civil partner’s income is taxed at a lower phone calls, stationery and advertising £40,000 tax relief each so a very worth while claim to rate than you or vice versa. Less: mortgage interest (total £3,000 x (£750) make if your property has increased in value over the years. £ Capital expenses 25%) Property income allowance Total taxable income £9,250 However, HMRC has announced that lettings relief will If the expenditure is a replacement or repair of an item, be reformed so that it only applies where an owner is in Since 6 April 2017 HMRC have allowed you to earn it is usually allowable as an expense. On the other hand, Tax due at higher rate 40% £3,700 shared occupancy with a tenant. These changes will take £1,000 of income from your residential property without if you are enhancing the property by making it better or effect from 6 April 2020. notifying them. replacing an item with a better quality item or fixture, it is usually classed as a capital expense and therefore not Mortgage interest deduction (total £3,000 (£450) This is to cover small amounts of ad hoc rental income, for If you are looking at disposing your rental property and allowable as a rental expense against your income. This x 75%) £2,250 example, you let your spare parking space for a minimal Tax deduction (£2,250 at basic rate 20%) this scenario applies to you, you might want to consider cost can be taken into account as an enhancement cost, weekly amount, or you rent your home out for a couple Total tax due 2019/20 £3,250 selling before the new reforms take place, but in any case and added to the cost of the property and tax relief will of weeks per year. If your annual gross property income please take advice before those signs go up. then potentially be obtained when you come to dispose is £1,000 or less, from one or more property businesses you will not have to tell HMRC or declare this income on of the property when calculating any capital gains liability. a tax return. As an additional warning, if your income was previously just under the £50,000 mark, and you were in full receipt If your income receipts exceed £1,000 in the year but of Child Benefit, your income will be increased due to this your expenses are less than £1,000, then the allowance change and so you may have to repay some or all of your can be claimed instead of the expenses, giving a reduction Child Benefit should the £50,000 mark be exceeded. The of £1,000 against the rental income receipts. In this repayment of Child Benefit must be declared on your Self scenario and if your rental income, before deduction of Assessment Tax Return. costs, exceeds £1,000, HMRC must be notified and a Tax Return completed. Gwen Rowlands - Tax Senior [email protected]

The Law Autumn 2019 I Page 8 The Law Autumn 2019 I Page 9 Our Guide to Investing

We recently published ‘Our Guide to Investing’ Taxation Our central commodity is advice based on long Our Guide to Investing hopefully articulates in simple and within this document we aim to convey both term trusted relationships for both individuals terms how we support clients through their own our investment philosophy and the main factors I cannot over emphasis the importance of sound and businesses. A good proportion of this advice investment journeys, to achieve prosperity, a secure we believe are important, whatever your level of tax planning to run alongside any investment. Using involves the investment of capital within a wide range future and peace of mind. A copy is available on knowledge and experience. this approach it is possible to generate a substantial of wrappers, such as pensions, ISAs and General our website https://www.armstrongwatson.co.uk/ Investment Accounts (GIAs). download-our-guide-investing So what are the key factors that we believe sit behind a retirement income and pay little or no income tax. carefully planned long term investment decision? For example, we recently helped long standing clients Every situation is different of course and clients’ overall enter full retirement and worked for some years to aims and objectives vary considerably. We take into ! Risk equalise their pensions and build up a good sized account the client’s level of knowledge and experience ISA portfolio. This has enabled them to take £16,000 as well as their personal objectives. Whatever one does with capital there is risk involved. per annum each from their pensions, where £4,000 If funds are placed in a savings account then the risk We take full account of the investor’s views, whether is tax free and the £12,000 sits within their personal we are dealing with an investor with entrenched views, is inflationary - as time goes by if the rate of return is allowance, so it attracts no income tax. They draw lower than the rate of inflation the buying power of the for example, someone wanting to include ethical £5,000 each from their ISA portfolio and overall this considerations, or perhaps with a preference for funds will diminish. Where funds are invested in real provides them with £3,500 per month with no tax assets then the risk exists that the fund value can fall. passive rather than active fund management; or an liability whatsoever. When their State Pensions kick in inexperienced first time investor with little investment Through a combination of focused discussions and they will reduce their pension drawings and still only knowledge who needs to be carefully guided through employing a risk profiling questionnaire, we are able pay a small level of income tax. the experience. We work hard to really understand the to help ensure each client invests within their own Whether you are building up funds for the future, level of support required at each stage of a client’s life comfort level and to minimise the chance of nasty approaching retirement or considering how best to cycle. surprises. The level of risk taken also needs to be pass funds on to the next generation, it is important regularly reviewed. to review all of the above regularly. We do this by employing cash flow forecasting, where we look at Diversification inflation, investment returns, life expectancy, income requirements now and in the future and all sources of It is unrealistic to believe that it is possible to consistently wealth and income, then produce a forecast, setting select the best performing asset classes and avoid out to what extent client aspirations are realistic. This the worst performing ones, so it makes sense that all is repeated at each review to ensure that plans remain the main asset classes are utilised, but in proportions on track. that take account of the client’s risk outlook. As well as asset classes, geographies and industries need to be diversified to maximise the chances of returns in line with expectations.

Time horizon

Risk is proportional to time. The longer one’s timeframe the more chance there is of meeting the investment objective. Downside volatility has the best chance of being overcome with a longer term outlook.

Justin Rourke - Senior Financial Planning Manager [email protected]

The Law Autumn 2019 I Page 10 The Law Autumn 2019 I Page 11 But when we carried out mystery shopping research As to how clients have responded, it is simply too last year, we found that many PI firms are missing out early to tell, but on the face of it transparency is a good An interview with... on significant amounts of business because of the thing; if you’re searching the internet for a solicitor one way they handle incoming enquiries from potential evening, the odds are that you will be keener on the An interview with Qamar Anwar, Managing Director at First4Lawyers, the UK’s largest independent legal clients. firm that gives you all the information up front than marketing collective… the one that makes you call or send an email. Following up contacts was the most striking problem: where firms had to call back the mystery shopper, 23% There is advice on compliance from the regulators of them did not do so for more than two days – or at themselves, while in conveyancing you see quote all. By contrast, 35% called back within 15 minutes, a generators, which are useful tools. But what we have 1. You have a track record of developing 2. What are the best ways for law firms to world-class level of response. still to see take off in legal services is comparison caseloads for law firms, and personal injury work with external marketing agencies? websites. There are various reasons for this, but such lawyers in particular. Given the current In the main, the mystery shoppers were happy with sites can help regulators achieve their aim of more To start with, both sides need to do their due diligence. their interactions with law firms. Four in five found choice and greater transparency from providers. changes in the personal injury market, For law firms, compliance is a top priority. They need their overall treatment warm and engaging, and there what do law firms in that sector need to be to ensure that their marketing partner complies with were virtually no complaints about having to wade The ideal legal comparison website will enable focusing on right now? the SRA’s rules and with LASPO, and be happy with through jargon. consumers to garner enough information about a the way in which it acquires and qualifies leads. Firms legal matter and potential law firm to give them the But what was lacking was a sense that the firm really Claimant solicitors we surveyed recently predicted obviously want to avoid fraudulent and spurious trust and assurances that they are making the right wanted the work – asked whether they felt the firm that the Civil Liability Act – which is due to come into claims, and particularly in high-value areas like clinical choice, rather than just looking at price alone. In attempted to add value or ‘go further’ for them, only force in April 2020 – will lead to a sharp contraction in negligence, it is important that leads are strong – a essence, like all of your marketing, you’re warming up 52% said yes. There was also evidence that many the market, with firm closures and staff redundancies. high failure rate from poor-quality cases can impact the client, making it easy for them to approach a law firms failed to ‘sell’ the value of using them to the There were also signs that the changing PI market is severely on profitability. firm and saving the law firm time by giving them more already having a negative impact, with 42% saying caller and usually did not offer either to send further tangible enquiries. their firm had seen profit decrease over the past year Equally, the marketing partner should have their own information or arrange to make a follow-up call. statement of values and service standards, and be Understandably, a lot of lawyers do not like the idea (it had increased for 30%), while 46% said cashflow One of the solicitors we interviewed for the report satisfied that the law firms they work with meet those of comparison sites – legal services are not as easily had worsened and 40% had seen staff numbers described incoming enquiries as “the single most high standards. If it’s just looking to pass on leads to priced as a holiday or car insurance, and that is reduce. Almost half said the cost of doing business important call that comes into the office”. As he put just anyone, then firms could be putting themselves in reflected in the limited range of work types to which had increased. it: “If you don’t treat that phone call with the respect it danger by dealing with them. the SRA transparency rules apply. It remains the On the plus side, only 13% of respondents believed the deserves, you might as well burn £5-600.” case that, outside of so-called commodity areas of reforms would lead to their firm closing, with a good Then there are the more straightforward issues like practice like conveyancing, will-writing and probate, number saying their firm was sufficiently diversified to competitive pricing terms and knowing exactly what 4. How are firms and clients responding to pricing is bespoke – but lawyers need to adapt to the cope. you are getting for your money. The marketing partner the new price transparency requirements? demands of the consumer age and at the very least should also be able to provide regular management have grown-up conversations with clients about fees In the short term, the deadline has already produced What help is there for firms in this regard? information, and be available for conversations and and ensure it is an ongoing dialogue – costs continue greater competition for work, adding further pressure meetings. Two-way communication is vital. Compliance is certainly a mixed bag, if SRA research to be one of the main causes of complaint to the Legal to the PI market in recent months as firms look to is anything to go by. The regulator recently reviewed Ultimately, though, both should be focused on looking Ombudsman, but most of these issues are easily make the best of the current regime. Though there 447 law firm websites (it looked at 500, but 53 didn’t after the injured person. That has to be the starting overcome by being open and prompt in addressing is speculation that the new regime may be delayed, work!) and found that 17% were not compliant at all, point. them. at least by a few months, time is running out for law and a further 58% were only partially compliant. firms to decide how they are going to face the future and adapt to meet the challenge of handling low-value 3. How do clients tend to decide which law The 78 firms that were not complying at all were given cases. firm to appoint? two months to do so, or face enforcement action. The partially compliant firms have been asked to add the The reality is that many claimants will still need and It is well established in retail markets such as personal missing information. The SRA will then target those want their assistance, and we know that solicitors injury that consumers assume lawyers have the firms in future websweeps, which it plans to carry out are looking at ways of delivering this in an efficient technical expertise to handle their case, and low- a least twice a year. and effective way – but with cases running in the value PI is especially unusual in that there is no real small claims court, meaning no costs recovery, and price competition. So, the quality of service, from the The most widespread failing was not displaying damages lower than now, the model will have to moment the phone rings or the email pings, is crucial. information on how to complain. Other areas included change significantly. Some firms will look to other This is especially important given legal regulators’ not specifying the amount of VAT applied to costs areas of work unaffected by the reforms, and so we efforts to encourage consumers to shop around for and not displaying information on key stages or likely can expect competition to stiffen here too – and firms legal services. timescales. Many firms were also not providing a must ensure they have the expertise to diversify. description or estimated costs of likely disbursements, It is important to realise that the dynamics between and again not specifying where VAT applied. lawyer and client are changing. Consumers are just one click away from seeing a competitor brand. Firms Qamar Anwar now need to be doing everything they can to stand out from that competition. Managing Director First4Lawyers

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Autumn 2019 A track record of providing solutions to the legal profession